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Pakistan Poverty Assessment: The World Bank Document

Poverty is multidimensional. One key dimension is consumption poverty — the extent to which actual levels of private consumption of households or individuals fall below a “poverty line” that society believes represents a minimum acceptable standard of private consumption. In the 1980s, Pakistan seems to have made good progress at reducing consumption poverty. For example, this report finds that the incidence of consumption poverty declined from 46 percent in 1984-85 to 34 percent in 1990-91. But poverty also encompasses other key dimensions; broadly speaking, they capture the extent to which the population suffers from early mortality, a high rate of disease, and illiteracy. These measures of human development relate to the extent to which the population has access to adequate health and education services. Slow progress in these areas has been the Achilles' heel of Pakistan's development effort, in sharp contrast to its generally good record on growth and economic policy. There have, though, been some recent improvements.

Human development is in itself a key objective of a county’s development. In addition, in the coming decades, sustained economic growth, and thus higher consumption standards, will depend more heavily on successful human development. Without sustained gains in health status and accumulation of skills, sustained improvements in labor productivity and incomes will not be possible. Moreover, experience from around the world indicates that improvements in the education of women and reductions in infant and child mortality rates will help reduce fertility and hence decelerate the rate of population growth — a major concern in Pakistan. Pakistan would be able to invest more on a smaller number of children, thus having healthier, better educated and better-off population.

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A new consensus has emerged in recent years that Pakistan must step up its human development. Our analysis indicates that four main factors have worked against better progress in Pakistan. First, access to public education, health and family planning services is still limited, especially among poor rural women and girls. Second, the services are often not actually provided, or are of low quality. Third, there is little accountability to service clients. Fourth, government resource allocations have been too low to provide adequate services. All these factors are interlinked.

The centrepiece of Pakistan's human development strategy is the Social Action Programme, which seeks to address all four factors. It is also seeking specifically to reach out to rural women and girls. Considerable progress has been achieved under the programme, but the achievements are fragile and are not yet fully institutionalised. Vigorously pursuing the activities and policy reforms embodied in the Social Action Programme is a component of a comprehensive poverty reduction strategy.

In addition to efforts to step up human development, this report suggests that the poverty reduction strategy should consist of three other components. The first would be to deepen the process of economic stabilisation and adjustment started in the late 1970. The second would be to complement the general economic reforms in the stabilisation and adjustment programme with a set of sectoral reforms, especially in agriculture. The final component would consist of efforts to strengthen the social safety net.

The ongoing economic reform programme seeks to address major weaknesses in Pakistan's economy, which will constrain economic growth if not tackled effectively. They include an unsustainably high fiscal deficit, a low national savings rate, insufficient investment in basic infrastructure, the increasing rigidity of current public expenditure (due to the large weight of defence and interest payments), inadequate integration with the world economy (due to inward-looking trade policies), financial sector weaknesses, and problems with governance and the quality of public administration. The economic reform programme has not been implemented consistently. However, a renewed commitment to the programme has been present since 1993, although there has been some weakening with the 1995-96 budget.

A more “sectoral” agenda of reforms is also crucial to reducing poverty and as a complement to the broad economic reforms. For rural areas, major policy and institutional changes to support growth and poverty reduction include improving the structure of incentives facing farmers; reorganising and decentralising the surface irrigation system; and reorienting public expenditures by agriculture public sector agencies. Land policy is an additional topic for reassessment. In urban areas, high priority should be given to providing basic social services in slums, and accelerating the programme for legalising informal occupancy. The report also recommends that the government give an explicit emphasis to helping poor women.

The final component of the poverty reduction strategy recommended in this report is to strengthen the social safety net. Several steps could be taken to enhance the anti-poverty impact of the zakah and ushr and Pakistan Baitui Maal as targeted income-transfer programmes. Government-run directed credit schemes have been an ineffective tool for helping the poor and need to be restructured. At the same time, NGO involvement in the provision of financial services to the poor and micro enterprises, while relatively recent in Pakistan, is expanding. This development holds the promise of a more efficient alternative to providing financial services to the poor than governmental schemes. Other government subsidies that are not targeted at the poor should be reexamined. Phasing out untargeted subsidies would free up scarce fiscal resources that could be allocated to basic social services, to worthwhile targeted programmes that benefit the poor, and to reducing the fiscal deficit.